THE SPARK: Analyst Sal Tharani lowered his rating to "Sell" from "Neutral" and cut his price target on the shares to $5.50 from $9.
Tharani said the global market for graphite electrodes has done well over the last decade because Chinese companies have not able to make higher quality electrodes and have sold few products overseas. But he said that is changing, as Chinese electrode producers are now doing more business in markets outside of China and improving the quality of their products.
THE BIG PICTURE: Graphite electrodes are used in certain kinds of steel production because they can withstand extreme temperatures. GrafTech said Tuesday that the market for graphite electrodes "has become increasingly competitive," mostly because of increased production capacity in China. The company said there is already more than enough capacity to meet demand for the electrodes, and further expansion is expected this year and next.
The Parma, Ohio, company sells products used in steelmaking and other industries. Like other industrial companies, it has struggled because of tough global economic conditions. The company reported its fourth-quarter results on Tuesday. Annual net income rose 30 percent, to $153.2 million, or $1.05 per share, and revenue rose 6 percent to $1.32 billion.
SHARE ACTION: GrafTech shares fell 82 cents, or 10.4 percent, to $7.10 in Wednesday afternoon trading. The stock is trading at its lowest levels in more than four years.